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Will 2013 Be The Year of Loyalty Programs?

During the past year, several mobile loyalty programs sprang up to entice small business owners with limited resources to create low-cost programs to reward frequent customers for purchases. These programs, such as LevelUp, Pirq, and Belly, allow business owners to tailor loyalty programs to their specific business needs. Of course, loyalty programs are nothing new – airlines have awarded miles for years and retailers like Starbucks continually evolve their own in-house programs.

The sudden proliferation of loyalty programs this past year, mainly via mobile apps, is an interesting indicator of what consumers can expect to see more of in 2013. Keith Smith, CEO of BigDoor – which powers the rewards programs for organizations and companies like NFL.com and Adobe – believes that in 2013, consumers will be offered a new type of loyalty program that does more than just reward customers for purchases. With the mainstream adoption of mobile smartphones and social media, he says, “It feels like there is this convergence of loyalty programs, engagement and gamification that’s bringing it all together.”

Smith explains that, “All these big brands that have existing reward programs are purchased-based or reward for purchases. Now they are starting to recognize that they need a digital layer that sits on top of these programs to reward customers for all of the actions that are taking place, whether it’s when they’re on social media or on the brand’s site.” He adds that these companies “need a way to enable customers to register and login them in so they can tell the company who they are so that they can reward the customer and thank them for their behavior” – and not just give them an extra cup of coffee.

Traditionally, loyalty programs have taken their queue from frequent flyer programs – which basically thanked fliers for their purchase and offered points to make the purchase feel less like a commodity. The points are typically available for more services from the awarding airline. The entire travel industry adopted similar tactics, with credit card companies like American Express close behind. Now, other retailers – especially big chains – offer reward programs based on purchases made.

Many of these reward systems lack integrated technology and game mechanics (and the psychology that makes gamification so successful) to further reward users for non-purchase interactions users have with the brand. Additional interactions have the potential to further strengthen loyalty.

This lack of features can largely be attributed to a lack of resources, coupled with a lack of knowledge about where or how to find and incorporate the necessary technology, even for features as simple as enabling a social sign-up on the brand’s website. Without this integration of in-store, mobile, and online, a brand potentially sees one consumer as three separate people, and the customer really has no incentive for returning to a website more often than absolutely necessary.

Smith explains that for brands, providing rewards for more than just purchases – such as interactions online – is important as many companies drive revenue via advertising. By providing rewards around engagement online, this encourages users to come back to the site outside of advertising campaigns, which benefits both the business beyond a tangible purchase, while also benefitting the customers with a tangible reward.

This tactic creates the much sought-after customer loyalty, providing a long-term financial benefit to the business by creating customers who keep coming back. When done right, these repeat visits by customer result in more revenue per customer over time.

Smartphone adoption is approximately 45% of all adults – up 10% since May 2011. Facebook reached one billion active users in October 2012. And gamification in the mobile space is proving to be a success in changing behavior. That all suggests Smith is undoubtedly right that we are at the perfect convergence for new types of loyalty programs to take hold to simultaneously provide better rewards to consumers, benefit businesses and create stronger ties of loyalty between the two.

The big question will be whether consumers will be willing to simply hand over our identity to every business for added benefits and rewards – and if so, what this says about our real stance as consumers about personal privacy.

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Can a rewards program actually create or strengthen customer loyalty, or is a rewards program just a way to reward a customer for having become loyal for reasons completely unrelated to the rewards program?

Personally, I am skeptical about the extent to which a rewards program can be effective in creating sustainable customer loyalty. As a consumer, my decision to become loyal to your company, product or brand is an emotional decision – I have to FEEL something that compels me to return or buy in a repeating cycle. It is also a function of how easy your company is to do business with.

I think the reason so many people are crazy happy about doing business with companies like Zappos is that they deliver not just on the product/practical side of their business but also on the emotional and low-effort aspects, and they do it over and over and over again.

I’ve never come across a rewards program anywhere capable of matching that power, at least yet.

Loyalty “programs” are becoming and will indeed be broader in terms of their value propositions. Spend and get is too little, but so is digital and social. Loyalty marketing is increasingly about delivering a more compelling customer experience at all touch points.

The comments from Scott Heitland illustrate the fact that there is an incredibly low bar when it comes to loyalty programs, both the traditional ones and the newer ones focused on social, digital and mobile.

For additional thoughts on the topic, here’s a white paper we released earlier this year on the upcoming Loyalty revolution: http://www.rdialogue.com/blog/revolution-will-not-be-televised-loyalty-marketing-needs-grow

Yes, loyalty programs are changing. The future of loyalty programs will be more than points or rewards for business. They will create interaction via gamification, making it fun to do business with the company. Home Shopping Network has already done this on their website. When it shifts into the loyalty program, it will add another level of interaction with the company.

I’m seeing big demand for loyalty programs among my sports team clients. In fact, I just fielded survey with 7 pro teams – asking fans how they view team mobile apps – and a majority of fans indicated they’d like to see mobile based, points / rewards for loyatly. Consequently, teams are particularly interested in extending to mobile through apps. for that I recommend: www.enthuse.com

As i described in my book “Loyalty Programs & Sales Forecast”, in a scenario growingly dominate by loyalty initiatives, companies need to differentiate themselves from the others if they are willing to have a return of their investment. It is exactly a brand’s unique positioning what determines its new evolutionary scenario. The differentiation lies in different characterizing approaches, from varying the ways in which rewards are given to changes in the program model up until a micro-loyalty scheme characterized by targeted initiatives deriving from targeting and customer segmentation.

Problem is most small businesses lack the time and money to put together a loyalty program. myCitiapp.com has an inexpensive and time manageable way for any small business to reach out to current customers while marketing to new customers. There is no doubt that smartphones are the now and future in reaching customers. No one leaves home without them.

Scott hit the nail on the head by saying that he has to FEEL something to compel him to return to a business and this is what loyalty programs need to provide – emotional engagement! Programs that go beyond points and allow businesses to give exclusive customer benefits and privileges (tailored to their audiences) and positive customer experiences will succeed. Gamification, a universal point system and customer segmentation are keys to creating a successful loyalty program.

I see level up; pirq and belly. Where is spot on. Spot on offers a true convergence of customer engagement; digital/social media and loyalty. Spot on is national and opening new markets in 2013. One card with endless pirks.

How about a loyalty program that gives back cash not stamps, points or pickles. How about one card that’s good everywhere you want to shop, locally, online, big stores and little stores. One card that allows you to get cash back when pumping gas, eating lunch or booking a vacation. You might ask where’s the loyalty! A portion of the rewards is locked into the card holder’s loyalty account and can only be spent at participating merchants creating big time loyalty. This Allows the card holder to use the benefits from his groceries and gas to buy a burger or a new shirt and he can pay for it out of his loyalty account right from his smart phone with no fees to him or the merchant. I can go on forever about this amazing program. Check out this video http://www.lyoness.net/us/wie-funktioniert-lyoness.aspx#tab-1 then contact me: cashback2u@outlook.com

I believe in 2013 we have seen a radical shift in reward programs. Many businesses are offering, what I consider, business discounting via smart phone apps. Small businesses leach into this form of marketing as they consider, punchcard discounting viable business practices.

However, as Scott mentioned, customer base grows via an emotional experience. If a reward program does not change consumers buying patterns, frequency, or increase the customer base via friend referring, the reward program is nothing more than digital discounting.

At the end of the day, without gamification or additional marketing features, punch card reward programs will disappear and gamification and enhanced reward programs will succeed.

Loyalty programs have to be easy for both the businesses and their customers. If a business wants to get a robust, flexible digital loyalty program up and running quickly, they can’t do better than textLIVING.

With textLIVING, there is no app required. The customer checks in by using their mobile phone number. That is all. Then the merchant has the ability to set a sign-up offer, an automated retention program that sends out text messages after a customized amount of time. They can also send out alerts to drive traffic to their business for a special event, new product or to simply fill a certain slow day. Check out their website at www.textliving.biz